Swiss Small & Mid Caps: Ideal conditions for active management
Swiss Small & Mid Cap stocks are ideal as an active alpha source, explains Felix Morger in the interview. The Senior Portfolio Manager for Swiss Small & Mid Caps elaborates on how his team and he identify attractive investment opportunities.
The key takeaways from the interview
- Even in 2026, Swiss Small & Mid Caps are likely to remain popular among investors as profit growth is expected to accelerate after a phase of consolidation.
- Thanks to the diversity of the Swiss Small & Mid Cap Index (SPIEX), both pair trades and thematic plays are possible from an investment perspective.
- When assembling a Small & Mid Caps portfolio, it is crucial to focus on stable alpha development, with quality playing a decisive role.
Felix, Small & Mid Caps delivered strong performance in 2025 and have had a good start to 2026. What makes them an attractive investment in the current environment?
Felix Morger: Indeed, Swiss Small & Mid Caps performed exceptionally well in 2025 despite some challenges, such as U.S. tariff policies. The reduction of the long-standing valuation premium compared to the Swiss Blue Chip Index SMI at the beginning of the year and the interest in companies with a high share of domestic revenue were key factors.
And what’s next?
In 2026, I believe Small & Mid Caps will continue to attract investors as profit growth is expected to accelerate after a period of consolidation. This anticipated growth is driven by the healthcare and technology sectors, while only moderate growth is expected in the financial sector. Overall, the trend is broadly supported.
Strong Earnings Growth in the SPIEX (Earnings per Share EPS in %)
Blue chips play a significant role in the Swiss stock market, with the healthcare, financial, and food sectors dominating. How does the composition of Swiss Small & Mid Caps differ?
The Swiss Small & Mid Caps index SPIEX is more balanced and diverse. It includes a broader range of sectors and more companies within each sector. This allows for the implementation of “pair trades,” where one stock within a sector is overweighted while another with a similar business model is underweighted. Additionally, the diversity of the SPIEX enables the inclusion of various current themes, such as data centers, energy transition, aerospace, and intralogistics within the industrial sector.
Our approach has worked exceptionally well in recent years.
Dr. Felix Morger, Senior Portfolio Manager for Swiss Small & Mid Caps
What does this mean in practice?
These two elements—pair trades and thematic plays—can be implemented within each sector. This makes portfolio construction much more dynamic and allows for a wide range of potential alpha sources, i.e., sources of market outperformance.
Diverse SPIEX: Diversification favors Swiss Small & Mid Caps (Sector Shares in %)
You are responsible for the Swisscanto Small & Mid Caps strategies. What are the key factors in stock selection?
We select stocks through detailed bottom-up research. Our team at the Asset Management of Zürcher Kantonalbank analyses companies based on their products, market position, balance sheet quality, and valuation. In addition to desk research, we maintain regular dialogue with company management and, where appropriate, their boards of directors. This allows us to validate our insights and address governance issues at the board level.
Stability and diversified alpha potential through thoughtful portfolio construction
Could you briefly explain how you construct a portfolio?
We assemble a portfolio based on our analyses and discussions. Our goal is to achieve the most stable and positive alpha development possible while avoiding pronounced sector and style exposures. To achieve this, we use quantitative elements and apply numerical portfolio optimization. The aim is for the quality of our stock selection to drive alpha, with minimal influence from overall market movements.
How has this approach performed in practice?
In our view, this approach has worked exceptionally well in recent years, as evidenced by the historical performance of our funds. For instance, the strategy achieved a total outperformance of 4.6% over three years, or approximately 1.4% per year compared to the benchmark. However, it is important to note that past performance is not indicative of future returns.
How the Swisscanto Small & Mid Cap Strategy has fared over the years
Performance comparison between the Swisscanto Small & Mid Caps Switzerland (II) Strategy (“SWC SMC II”), the benchmark SPIEX, and the Morningstar peer group category “Switzerland Small/Mid-Cap Equity” as of the end of December 2025.
It should be noted that any information regarding historical performance is not an indicator of current or future performance, and any performance data provided may not take into account the commissions and costs incurred when issuing and redeeming fund units. The net performance of the respective fund is available upon request.
Funds in Focus
Funds in Focus
Legal Notice
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Historical performance is not an indicator of current or future performance, and performance data may not account for commissions and costs incurred when issuing and redeeming fund units.
Legal notices regarding the charts: “BLOOMBERG®” and the Bloomberg indices listed herein (the “Indices”) are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the Indices (collectively, “Bloomberg”) and have been licensed for use for certain purposes by the distributor hereof (the “Licensee”). Bloomberg is not affiliated with Licensee, and Bloomberg does not approve, endorse, review, or recommend the financial products named herein (the “Products”). Bloomberg does not guarantee the timeliness, accuracy, or completeness of any data or information relating to the Products.
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